This paper analyzes  an alternative setting with risk of default in which decisions of households and firms on domestic and  international borrowing and lending are separated. We study an economy in which only firms can participate in international  financial markets as well as in domestic credit markets. Default decision are then taken by firms (not by the government) which will  repay its debt only as long as  the value of the firm integrated to international  capital markets is not lower than its value of reverting to autarky at some cost.

We show that this alternative setting is isomorphic to one in which default decisions are taken by  households by means of a fictitious government with access to international credit markets. We derive an optimal financial-dividend policy of the firms that decentralize constrained efficient allocations in a framework in which firms can issue corporate bonds of different maturities. Then, we investigate as the implementation of capital controls by means of linear taxes on corporate debt issuance can provide the right set of incentives to firms to decentralize constrained efficient allocations. That is, we ask how this class of model with risk of default can rationalize macro-prudential policies. 

Finally, we quantitatively investigate some properties of optimal capital controls in two dimensions.  First, we ask how optimal taxes must be conducted over the business cycle.Then, we study how optimal taxes must be set on debt of different maturities.

Ph.D. in Economics, Cornell University. Profesor asociado del Departamento de Economía, Universidad Torcuato di Tella. Se especializa en teoría macroeconómica, sus trabajos han sido publicados en el Journal of Economic Theory, Quantitative Economics (Econometric Society), entre otras revistas especializadas.